~ Knowing is not enough; we must apply. Willing is not enough; we must do.

Monthly Archives: October 2014

Today let’s have a random walk on Wall street to find out how to price an option. An option is a derivative financial contract which derives its value from the performance of another entity such as an asset, index, or interest rate, called the underlying. An option gives the buyer (the owner) the right, but not the obligation, to buy or sell an underlying asset or instrument at a specified strike price on or before a specified date. The buyer pays a premium to the seller for this right. Continue reading →